Friday Interview: Counties Save Money Through Privatization | Eastern North Carolina Now

   Publisher's note: This week's "Daily Journal" guest columnist is Donna Martinez, Carolina Journal, Radio Co-Host, John Hood Publisher, and Right Angles blogger.

JLF local government expert compiles results of N.C. statewide survey

    RALEIGH     Across North Carolina, some county governments are saving money by privatizing services. A recent John Locke Foundation report catalogues privatization practices from 44 counties. Report co-author Dr. Michael Sanera, John Locke Foundation director of research and local government studies, discussed the research with Donna Martinez for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)

    Martinez: What do we mean when we say "privatized services"?

    Sanera: Well, the basic concept is to introduce more competition into government. In the private sector, we're all familiar with the fact that we all benefit because Wal-Mart competes with Target, and the advertising that they produce provides us with information that we can get the best deal for when we do our shopping. In government, it's quite different because often it's a monopoly situation -- the fire department, the police department, the EMS -- they're the only game in town, and it's more of a monopoly. So it's harder for public managers to manage because they don't have a competitive environment. Privatization attempts -- not perfectly -- but attempts to introduce some of that competition into the public sector. When you have a service like landfill operations, and you have a government bureaucracy conducting -- producing -- that landfill, it's always smart to go to the private provider and say, "Why don't you give us a bid on providing that same service, and we'll see which one is cheaper?" That introduces competition into the public sector.

    Martinez: Saves money. It helps the taxpayer.

    Sanera: Absolutely, and provides a better service.

    Martinez: You and research intern Kevin Munger sent out some surveys to county managers. Not quite half of them responded to you. So we have information from about 44 counties. They told you what they're doing and what works -- and what doesn't work. And you asked them about specific categories, types of things. Let's talk a little bit about that before we get into some of the counties' activities. Competitive sourcing -- what is that?

    Sanera: Well, competitive sourcing is the idea that you currently have government employees providing a service -- a landfill operation, an EMS (emergency medical service) -- and what you want to do is, to be fair to those government employees, you let them produce a bid along with a private provider. So it's not just saying, "You guys, we're going to throw you out and hire a private company to provide this service."

    Martinez: They get to compete.

    Sanera: They get to compete. So they need to sit down with their paper and pencil and figure out how much they can charge, and how much the salaries are going to be, the equipment is going to be -- everything that the private provider would have to do -- and then you get two bids. One from government employees, and you get one from a private provider. And then you see which one is cheapest, saves the most money, and provides the best service.

    Martinez: Now, based on the information the counties sent back to you, are you finding that there are counties in our state who are using that type of activity to try to find the most efficient, most cost-effective way to deliver a service?

    Sanera: Absolutely. In addition to competitive sourcing, we have contracting out, which is just a basic contracting out. We have what's called asset sales. That's taking unneeded property -- usually we like to see a large building or something like that that is no longer needed -- and they just sell it in order to gain revenue, especially during this hard economic time. And then we also have something called public-private partnerships, where you get a more mixed situation, where government and a private provider are working together on something. That is usually confined to maybe building a building that is needed for a county operation. We were somewhat disappointed that we only got 44 responses, but this is the first time out for this, so many of them were not familiar with this. We couldn't tell whether that lack of response was because they just didn't bother to fill out this questionnaire, which we kept very simple, or that they didn't have any privatization to report to us.

    Martinez: I know as well that we're not quite sure, based on the information they provided, exactly how much money they think they saved the taxpayer. But we do know that some counties are engaging in some of these competitive activities. Michael, did you find that there are any particular counties that seem to be more willing to reach out and try these innovative approaches?

    Sanera: Absolutely. We got telephone responses with follow-up questions and that type of thing from several counties. Gaston County submitted 22 pages of information, so they went right down to the nitty-gritty and listed everything possible. We couldn't put that into the report, but we also listed a contact phone number in each of the counties so that if people have questions regarding a specific detail, they can contact the people in the counties to follow up. Our hope with this is that it will stimulate more discussion among the county leaders, among county managers, among county commissioners, so that they can kind of say, "Oh, the county next door is saving money by contracting out their jail food service. Why don't we do that?" And so it will raise a lot of issues and discussion, and we hope to see, next year when we conduct this study, a lot more information and a lot more counties responding.

    Martinez: So Gaston County is one that seems to be well on its way to engaging in these activities. Any other counties that stood out to you?

    Sanera: Haywood County is one of the ones that we used as an example because they are currently in the process of privatizing their landfill operations, and several counties already do that. Wake County does that. But the movement -- what we like to see is the movement and consideration of more counties considering privatizing activities, and Haywood County is one of the top ones that's doing that with a major operation.

    Martinez: The counties who responded also gave you data about things they said they tried, and that did not work well, for one reason or another. Talk a little bit about that. There seem to be some recurring themes here -- custodial services, cleaning of buildings.

    Sanera: Correct. We wanted to make sure we gave them the opportunity to tell us what works and what doesn't work. We're not there on a day-to-day basis, and we don't have our finger on the pulse, so we want to make sure we ask them both what works and what doesn't work -- because we might gain a lot from that. And several counties came back and reported they had tried certain privatization -- custodial services -- and then they've either had problems with the contract, which is critical, or the actual delivery of the service. So they decided to pull it back and decided that it was cheaper. But we believe that, again, the taxpayers benefit on both sides of this coin because the counties are going through the process. They're looking at the bottom line. They're looking at ways of saving money, whether they privatize it out or don't privatize it out. As long as they go through the process, it's something that allows, especially county managers and county commissioners, to have more information about cost of services.

    Martinez: So you plan to do this every year?

    Sanera: Yes.

    Martinez: And get an update on what's being done and, as you said, hopefully some county managers will look at the report and say, "Hey, you know, my peer over in X-Y-Z County is doing this. Maybe I'll give him or her a call and see what happened."

    Sanera: You bet. That's the purpose.